A closer look at Obama’s energy plan

Economy may slow it, but ‘green’ jobs may grow it.

Workers inspect one of two Mammoth Pacific geothermal power plants in the Sierra Nevada Mountains of California. Brine from the Casa Diablo Hot Springs powers the plants.

If President-elect Barack Obama enacts the energy plan he laid out during his campaign, American taxpayers will each get a $500 rebate check – funded by a windfall profits taxes on big oil companies.

But that’s just for starters. Besides taxing oil giants more, Senator Obama’s detailed 30-point energy agenda calls for big changes to address carbon emissions, fuel efficiency for vehicles, and domestic and renewable power and efficiency.

While many candidates’ platform promises are cast aside when political opposition looms, the Obama energy plan seems integral to his promise to get the economy restarted, some experts say.

“Obama’s energy plan is much more than a campaign laundry list,” says Bracken Hendricks, a senior fellow at the Center for American Progress, a think tank chaired by John Podesta, who heads the Obama administration’s transition effort. “It really is a centerpiece of Obama’s economic development strategy for the nation, for energy security, and rebuilding our cities and infrastructure,” Mr. Hendricks says.

Among more than two dozen bullet points, Obama’s energy plan includes:

• Putting 1 million plug-in-electric hybrid vehicles (PHEVs) on the road by 2015 – cars that can get the equivalent of 150 miles per gallon.

• Creating 5 million new “green jobs” by investing $150 billion over 10 years to stimulate clean-energy infrastructure and manufacturing such as wind-turbine plants and solar panels carpeting the nation’s rooftops.

• Cutting US oil consumption, within 10 years, by the amount currently imported from the Middle East and Venezuela combined.

• Requiring 10 percent of the nation’s electricity to come from renewable energy sources like wind, solar, geothermal, and biomass by 2012. By 2025, raise that to 25 percent.

• Establishing an economy-wide cap-and-trade program that cuts US greenhouse gas emissions by charging for every ton of carbon dioxide that goes into the sky from coal- and natural gas-fired US power plants.

Can Obama do all that and more – or will political and economic obstacles ultimately turn the plan into a much more modest effort? How much was campaign window dressing, and how much energy transformation will the US undergo?

“Obama has enormous political support for his clean-energy agenda,” says Anna Aurillio, director of policy development for Environment America, an environmental group. “If you look at the regions that will be impacted by the changes – middle America and New England in particular – these are places that will benefit from clean energy and back him politically in making this change.”

Some elements of Obama’s energy plan are costly, but also vital to the rest of the plan. For instance, sales of pollution permits from the cap-and-trade program to limit CO2 emissions across the economy are key to helping fund the plan’s $15 billion per year (for 10 years) expenditure on renewable energy research and development.

But some say rising electric rates – the result of costs involved with greenhouse-gas emissions – could stir political opposition and derail implementation, especially given the economic crisis.

“In times of economic stress, the last thing you want to do is increase peoples’ energy costs with something like cap-and-trade,” says Anne Korin, cofounder of the Set America Free Coalition (SAFC) of energy-security hawks and environ­mentalists. SAFC calls for policies that would disconnect the US from imported oil. “There’s a lot of talk about that, but a congressman who wants to be reelected would be very wary of that,” Ms. Korin says.

While no one has recalculated the cost-benefit for Obama’s official energy plan, some earlier calculations for similar – albeit rosy – plans
suggest that the net effect would still be a plus for green jobs and the economy.

The Apollo Alli­ance, a labor-environmental coalition, has put forward a proposal that contains proposals similar to those in the Obama plan. The alliance calls for a federal investment in clean-energy technology and green building that’s twice as large ($300 billion) as Obama’s. Their analysis calculates more than $1.4 trillion in savings and economic growth.

The pedigree of Obama’s plan also suggests that it is more, not less, likely to be implemented, Mr. Hendricks says.

Much of the Obama plan follows the National Commission on Energy Policy’s (NCEP) 2004 plan, a consensus document in which – as in the SAFC plan – energy-security hawks joined environmentalists and industry. In fact, NCEP director and plan coauthor Jason Grumet is a likely candidate for an energy post in the new administration.

Besides the advantage of having been pre-vetted by energy, foreign policy, and industry experts, the plan also has something of a mandate. Obama often touted the need for a new energy equation during the campaign. Renewable-energy tax credits were stymied regularly in the US Senate this year. So an Obama mandate could help win over a Senate in which Democrats are now just three votes short of a filibuster-proof majority – with three races still in contention.

“There’s a lot of good stuff here, but like any campaign platform, they’ll be fortunate to implement half of it,” says Steve Nadel, executive director of the American Council for an Energy-Efficient Economy. “Still, I have been hearing through the grapevine that they [Obama’s camp] are quite serious about it. The question is whether Congress will go along. There’s a good chance that a significant fraction [of the plan] will go through.”

One of the fastest ways to lower energy costs is efficiency. Obama’s energy plan touts tougher efficiency standards and decries the Bush administration for missing 34 deadlines for improving energy-efficiency requirements for appliances and electrical equipment. During its tenure, the Bush White House enacted just two new energy-efficiency standards, one for electrical transformers and one for home furnaces, both of which were considered too weak and are now being challenged in court by states and environmental groups. If all 25 Obama-proposed energy-efficiency standards were adopted, they could save the yearly equivalent of all the power produced by 57 large power plants, says Andrew Delaski, executive director of the Appliance Standards Awareness Project, an environmental watchdog coalition.

An early test of the new administration – and its willingness to risk industry displeasure – will come in June. That’s when a new rule on commercial lighting – to improve the efficiency of those ubi­quitous four-foot-long fluorescent tubes used in office buildings nationwide – comes up for final approval.

It’s a big deal. If the Department of Energy enacts a tough rule, it could have one of the most significant energy-efficiency impacts in US history, saving the equivalent of $66 billion in power costs over the next 30 years. That’s enough to power every home in the US for one year, says Mr. Delaski.

A strong rule could mean that the US could essentially replace 15 large power plants with the energy savings and slash carbon dioxide emissions by 950 million tons. The Bush administration could still propose a weaker rule in its waning days.

“The rubber is going to hit the road pretty quickly for this administration,” Delaski says. “Are they going to really push for tough standards or just go along with weaker standards favored by the lighting industry?”

One measure of Obama’s resolve to reform the US energy equation could come as soon as Nov. 12: That’s when he may consider a proposal by the Center for American Progress to create a National Energy Council within the White House. This is according to Kevin Book, senior vice president for energy policy at Friedman, Billings, Ramsey Capital Markets, writing to investors in a recent newsletter.

Others agree Oba­­ma is likely to push hard for a sweeping rather than piecemeal energy agenda early in his administration.

“This energy plan is not just about environment, climate change, energy prices, or supplies individually,” Hendricks says. “It’s an overarching plan that embodies Obama’s approach to national service, energy security, and economic stability. He’s going to hit it head-on.”

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